Teva is ‘Poorly Performing’ and has a ‘Dysfunctional Culture:’ Mylan Exec

Mylan executive chairman Robert Coury issued a stinging rebuke today of Teva Pharmaceutical’s unsolicited bid, using terms harsh even for the sharp-elbowed world of deal making to explain why the generic-drug maker’s board rejected the $40 billion deal.

In a 3,216-word letter, Coury questioned the credibility of Erez Vigodman, the Teva chief executive; repeatedly chided Teva for a “dysfunctional culture;” and disparaged what he called a “poorly performing, troubled company” that has displayed “consistent underperformance.”

"Teva has faced a constantly changing and flip-flopping strategy, rotating leadership, shareholder outrage and a flat to negative growth outlook,” Coury wrote. He added that the combination “lacks industrial logic and is a terrible cultural fit.”

In a statement issued in response to the rejection, Teva reiterated its rationale for the bid, but didn’t address any of the criticisms leveled by Coury. Teva maintains a combination would make a strategic fit and could operate more efficiently, with an estimated $2 billion in annual cost and tax savings. A Teva spokeswoman said the drug maker wouldn’t have any further comment.

Calling Mylan “a great company,” Coury derided the notion that Mylan stockholders should accept what he termed “low-quality and high-risk” Teva shares. It is “implausible” that Teva can satisfy Mylan’s board, he wrote, adding that any discussion of a sale would have to start at a price “significantly in excess of $100 per share.” Teva has offered $82 a share for Mylan.

His remarks come after people familiar with the matter last week said that Teva stock is frequently referred to as "toilet paper" inside Mylan.

The missive underscores the bitter rivalry between the two companies, which have been jockeying for supremacy among generic-drug makers, while simultaneously trying to expand into brand-name medicines and establish global operations.

Sanford C. Bernstein analyst Ronny Gal says that he did not expect “as venomous a response as this has been. If Mylan believes it can offer its shareholders a better value than Teva’s offer, I think it has some explaining to do."

A Teva takeover of Mylan, by the way, would create the world’s top-selling generic-drug company with more than $30 billion in sales in 145 countries. Shares in both drug makes were down. In 4 p.m. trading, shares of Mylan fell 5.7% to $71.72, while Teva was down 4.3% to $61.63.

Known for being plain-spoken, Coury pointedly expressed disappointment that Vigodman publicly declared interest in a deal before privately approaching him. And he suggested the move reflected the sort of management turmoil that led to Vigodman becoming Teva chief in early 2014 after being a Teva board member for several years.

“Since 2007, your board has churned through three different chief executive officers,” Coury wrote, noting that while Mr. Vigodman is “fairly new” to the ceo position, he was on the board during “turbulent” times at Teva.

And Coury contrasted Vigodman’s approach with Mylan’s own hostile bid for Perrigo earlier this month, which he described as being based on “a long history of mutual respect.” After private discussions, “I personally informed [ceo Joe Papa] in advance of making the proposal public.”

Late last week, Mylan raised its offer for Perrigo to $33 billion, from $28.9 billion, which was promptly rejected; Mylan stood by its offer. A Perrigo representative didn’t immediately respond to a request for comment.